UK the agony and the ecstasy

Reblogged from Michael Roberts blog at http://thenextrecession.wordpress.com/2014/10/18/uk-the-agony-and-the-ecstasy/ The Bank of England chief economist certainly put the cat among the pigeons with his speech on the British economy on Friday (http://www.bankofengland.co.uk/publications/Documents/speeches/2014/speech764.pdf). Andy Haldane was ‘off message’ from the story painted by his boss, the useless, confusing and grotesquely overpaid Mark Carney (see my post https://thenextrecession.wordpress.com/2013/08/13/a-blind-guide-dog). For months Carney has been going around hinting that the BoE would hike interest rates soon because the UK economy was booming and he wanted to control the racy property market and avoid rising inflation (instead inflation is now slowing fast!). In contrast, Haldane says that he is “gloomier” about the prospects for the economy than he was a few months ago and thinks that rates will have to stay lower for longer. Now Haldane has ‘form’ in being off message and not following the banker’s line. He even spoke to the Occupy movement in the days of the crisis, suggesting that they had plenty of things to complain about and that the banking system was to blame and needed radical reform (see my post https://thenextrecession.wordpress.com/2013/10/31/the-value-of-banking-according-to-mark-carney-and-alan-greenspan/). A little bit more on message was Haldane’s warning that Britain was vulnerable to another round of the Eurozone crisis. This is the line adopted by the UK’s conservative finance minister, George Osborne, who has already suggested any slump in Europe would be the excuse for the downturn in the so-called boom in the UK economy – forecast to be the fastest growing in the G7 this year (see my post, https://thenextrecession.wordpress.com/2014/10/10/draghis-answer-to-euro-depression/). However, Haldane went off message again in his so-called Twin Peaks speech, when he outlined the fault-lines in the UK economy: falling real-wage growth and flat-lining productivity. On wages, Haldane was brutal: “Growth in real wages has been negative for all bar three of the past 74 months. The cumulative fall in real wages since their pre-recession peak is around 10%. As best we can tell, the length and depth of this fall is unprecedented since at least the mid-1800s! This has been a jobs-rich, but pay-poor, recovery.” Haldane has constructed what he called his ‘agony index': a simple index of real wages, real interest rates and productivity growth. In this blog, I have referred to a ‘misery index’, the sum of the unemployment rate and inflation, as an indicator of misery for the average household (https://thenextrecession.wordpress.com/2011/01/29/britains-misery-index/). But in an economy like the UK or the US, where unemployment and inflation have been falling but real wages have collapsed along with productivity and pension returns, Haldane’s agony index is way better. Haldane’s index shows that the British people and the economy have been in ‘agony’ for the longest time since the 1800s, with the exception of world wars and the early 1970s. This is not the sort of thing that the government and Haldane’s boss, Carney, want to hear. But as Haldane said: “The BoE, in common with every other mainstream forecaster, has been forecasting sunshine tomorrow in every year since 2008 – that is, rising real wages, productivity and real interest rates. The heatwave has failed to materialise. The timing of the upturn has been repeatedly put back.” Instead it was a mixed picture of ‘twin peaks’ of agony for average households and ecstasy for richer ones. To add to Haldane’s argument and refuting the line of the government that the British economy is on the road to sustained recovery and fast growth, official figures on productivity growth in the major economies since the Great Recession have been released. Output per hour in the UK was 17% below the average for the rest of the major G7 industrialised economies in 2013, the widest productivity gap since 1992. On an output per worker basis, UK productivity was 19% below the average for the rest of the G7 in 2013. And it is getting worse. UK output per hour fell slightly in 2013 compared with 2012, contrasting with an increase of 1.0% across the rest of the G7. UK productivity levels are about the same as in 2007, but 15% below where they ought to be if pre-crisis productivity growth had continued. And productivity growth matters if overall economic growth is to be sustained. Real GDP growth is a combination of employment growth and productivity growth (output per worker). Employment growth in the UK even with wholesale immigration (and that is going to stopped by a re-elected Tory government) is unlikely to be higher than 1% a year. So to achieve sustained 3% real GDP growth, the minimum necessary to get unemployment down further, reduce the budget deficit and government debt and start to raise real incomes, productivity growth must be at least 2% a year. But instead it is falling. I have discussed the reason for these chronically bad productivity figures in previous posts (https://thenextrecession.wordpress.com/2014/05/07/britain-is-booming/). It’s been a combination of the growth of low value-added self-employment (taxi drivers, cleaners, odd jobbers etc), low skilled part-time, temporary and full-time jobs (Asda, McDonalds, Starbucks etc) and, above all, the lack of new investment in technology to boost the productivity of those working. UK business investment remains in the doldrums, while public sector investment has collapsed (see my post, https://thenextrecession.wordpress.com/2014/02/26/is-the-uks-investment-strike-over/). What Haldane did not say was why there had been such the fall in real wages and a rise in his agony index. It’s because rather than investment to raise productivity, British capital has opted to squeeze wages and cut costs to try and restore profitability. You see, contrary to the view of neoclassical and Keynesian economics alike, productivity and profitability are not the same thing – indeed they are often contradictory. Squeezing wages has boosted the rate of exploitation (and raised levels of inequality). But this has failed to raise UK profitability much. The way to raise profits is by new labour-shedding technology that increases productivity and lowers costs. But British capital is reluctant to invest when it is still burdened with spare capacity in old technology and corporate debt. That needs to be liquidated first – in another slump. There is more agony to come yet.

Are we witnessing a housing bubble?

House prices outside London and the South East rose by 0.8% in the last year according to the Office for National Statistics in London it was even greater at 9.9% this is an incredible rate of increase and shows a lot of the housing policies this government have brought in are aiding this property bubble. UK house prices have been rising at the highest annual rate since June 2010. The rise coincides with the government's Help to buy scheme, introduced to boost the housing market. But will the scheme create a new housing bubble? UK house prices have risen by 9.9% in the year to August, according to the Halifax's latest house price survey. The government's Help to Buy scheme, which began in April, allows buyers to put down a deposit of just 5%, and take out an equity loan from the government for up to 20% of the property's value, up to a maximum home value of £600,000. It is designed to help first-time buyers get on the property ladder and enable existing homeowners to "trade up" to larger properties by giving banks greater confidence to lend. Help to buy currently only applies to new builds but from January it will be extended to cover existing homes, with mortgages being backed by a government guarantee. The scheme got off to a "flying start", according to the Home Builders Federation (HBF) in June. But Help to buy has also been criticized for having the potential to artificially raise house prices, with Business Secretary Vince Cable warning of "serious inflationary pressures". Experts give their views on whether help to buy risks creating a new housing bubble. Dr Beverley Searle, research fellow at the Centre for Housing Research, University of St Andrews Help to Buy, or any intervention which helps pay for housing, will inevitably create a housing bubble. Providing assistance with the purchase of housing artificially props prices up. We have witnessed this twice before. When it became easier to borrow money during the 1980s house prices rose. Even after the 1990s downturn the market just kept finding ways to lend people more money, allowing prices to rise again. If people cannot afford to buy a home because they cannot afford to save for a deposit, then there is something fundamentally wrong with the housing system. The government is clearly acknowledging this by providing an additional "deposit loan". For prices to stabilise there needs to be a significant increase in the supply of housing for sale and rent and the market given time to adjust. Even though Help to Buy is aimed at new build properties, it will interfere with this adjustment process. It seeks to encourage high levels of demand, with only a very limited increase in supply. The housing market has failed, it needs government intervention, but this should be in supplying housing people can afford, not letting them borrow more money for housing they cannot. Quite clearly this is adding some of the growth we are seeing now in the UK but will this last? With the UK’s rate of profit still not recovered to anywhere near what it was like before the great recession and there seems to be no will to revive the rate of profit. Housing is one way of boosting credit but I can only see this being a short term fix. The next boom is coming which will be followed by another bust. Due to the unfixed contradictions of capitalism which are always there a bigger crisis is not far away.

minimum wage is 9% lower in real terms than when introduced , fight for a living wage now !

The minimum wage was one of the better things new labor did it gave young people protection by the law in terms of low pay.


One of the better ideas by labour didn’t stop it finding difficulties as I have blogged on before many companies and employers find ways around paying minimum wage which still sits at a tiny level in 2012.

As the socialist party and youth fight for jobs we fight everyday for levels of pay and conditions which are falling all the time. At the moment the national minimum wage isn’t under huge threat from being scrapped but there may come a day. But while this is the case we must continue to fight hard and doggedly for a national living wage keeping pace with inflation as a reformist measure for workers.

As Marxists we are not reformist we may fight dam hard for the best reforms for working class people but also point out that reforms will never last and will be given with one hand and taken with the other by the ruling class.

SO a national living wage of 8 pounds an hour rising to 10 pounds an hour as a sliding scale of wages would be our stance. With trade union recognition in all workplaces and the right to join a trade union.

Everything is up for grabs right now and the minimum wage is not safe at all may be for now but it will come back on the agenda. It was just the other year Phillip Davies a Tory MP suggested disabled people taking jobs for less than minimum wage just to get work. How insulting. Gives me further impotence to fight for a living wage and ultimately the means of production to be in the hands of the working class where the wage labor system is abolished for good.

The minimum wage is no longer at the rate it was when it was introduced due to the cost of living and inflation. Yet no one is pointing this out only us labour who introduced the law is silent on the issue as they like the Tories are servants to the capitalist system and are in the pockets of big business and the bankers.

As well as fighting for a national living wage this must be linked to the need for a new workers party which can provide reforms with the eventual goal of transforming society to one based on everybody’s needs.

minimum wage is 9% lower in real terms than when introduced . , fight for a living wage now !

|We need a living wage for all!

The minimum wage was one of the better things new labor did it gave young people protection by the law in terms of low pay.


One of the better ideas by labour didn’t stop it finding difficulties as I have blogged on before many companies and employers find ways around paying minimum wage which still sits at a tiny level in 2012.

As the socialist party and youth fight for jobs we fight everyday for levels of pay and conditions which are falling all the time. At the moment the national minimum wage isn’t under huge threat from being scrapped but there may come a day. But while this is the case we must continue to fight hard and doggedly for a national living wage keeping pace with inflation as a reformist measure for workers.

As Marxists we are not reformist we may fight dam hard for the best reforms for working class people but also point out that reforms will never last and will be given with one hand and taken with the other by the ruling class.

SO a national living wage of 8 pounds an hour rising to 10 pounds an hour as a sliding scale of wages would be our stance. With trade union recognition in all workplaces and the right to join a trade union.

Everything is up for grabs right now and the minimum wage is not safe at all may be for now but it will come back on the agenda. It was just the other year Phillip Davies a Tory MP suggested disabled people taking jobs for less than minimum wage just to get work. How insulting. Gives me further impotence to fight for a living wage and ultimately the means of production to be in the hands of the working class where the wage labor system is abolished for good.

The minimum wage is no longer at the rate it was when it was introduced due to the cost of living and inflation. Yet no one is pointing this out only us labour who introduced the law is silent on the issue as they like the Tories are servants to the capitalist system and are in the pockets of big business and the bankers.

As well as fighting for a national living wage this must be linked to the need for a new workers party which can provide reforms with the eventual goal of transforming society to one based on everybody’s needs.

minimum wage is now 9% lower in real terms than when introduced . , fight for a living wage !

The minimum wage was one of the better things new labor did it gave young people protection by the law in terms of low pay.


One of the better ideas by labour didn’t stop it finding difficulties as I have blogged on before many companies and employers find ways around paying minimum wage which still sits at a tiny level in 2012.

As the socialist party and youth fight for jobs we fight everyday for levels of pay and conditions which are falling all the time. At the moment the national minimum wage isn’t under huge threat from being scrapped but there may come a day. But while this is the case we must continue to fight hard and doggedly for a national living wage keeping pace with inflation as a reformist measure for workers.

As Marxists we are not reformist we may fight dam hard for the best reforms for working class people but also point out that reforms will never last and will be given with one hand and taken with the other by the ruling class.

SO a national living wage of 8 pounds an hour rising to 10 pounds an hour as a sliding scale of wages would be our stance. With trade union recognition in all workplaces and the right to join a trade union.

Everything is up for grabs right now and the minimum wage is not safe at all may be for now but it will come back on the agenda. It was just the other year Phillip Davies a Tory MP suggested disabled people taking jobs for less than minimum wage just to get work. How insulting. Gives me further impotence to fight for a living wage and ultimately the means of production to be in the hands of the working class where the wage labor system is abolished for good.

The minimum wage is no longer at the rate it was when it was introduced due to the cost of living and inflation. Yet no one is pointing this out only us labour who introduced the law is silent on the issue as they like the Tories are servants to the capitalist system and are in the pockets of big business and the bankers.

As well as fighting for a national living wage this must be linked to the need for a new workers party which can provide reforms with the eventual goal of transforming society to one based on everybody’s needs.

Have world governments given up on full employment

Full employment seems to be a mystery to many and a fantasy for others. Did we ever have full employment in the United Kingdom and will we ever see this again ?
In todays Britain we currently have 2.6 million unemployed people at present with over a million of those being
16-24 without a job. or in any form of training

But has there ever been full employment? That depends, like a lot of economics, on one's definition of the term.

"Full employment never meant zero unemployment," says Christopher Pissarides, professor of economics at the London School of Economics.

As long as most people were in work it was seen by the majority of people that it didn't matter if rather a lot of other people, albeit a minority, were not. So unemployment lost its profile as an issue”
End Quote
Historian David Kynaston
Instead there is what the free market capitalist economist Milton Friedman termed a "natural rate" of unemployment, where nobody stays out of work for long, unemployment fluctuates between 5% and 6% with jobless workers quickly being hired in growth sectors of the economy.

Other economists argue this is too high. William Beveridge, the man who inspired Britain's post-war welfare state, said full employment meant a figure of under 3%.

Before the world became industrialised, nearly everyone outside the ruling rich elite would have had to work to survive, usually in the fields. After industrialisation all that changed. Mechanisation offered people work in the factories but also brought huge spikes in employment and an intensification of economic boom and bust which is built into capitalism like night and day. Due to its various contradictions which i have detailed in the past on this blog.

Pissarides argues that full employment was a reality in the US in the 1990s under Bill Clinton and from 1997-2007 in Britain, and in modern day China.

Other economists say it's not fair to compare democracies with autocratic societies. Children learn in history lessons about the mass mobilisation of men in Hitler's Germany for armaments production and public works programmes. "Conscripting people over the barrel of the gun in totalitarian societies is not full employment as economists understand the term," says economic historian Tim Leunig.

In 1955 unemployment was very low indeed So has genuine full employment ever been achieved in the post industrial world? "Of course we've had it," says the economist Lord Skidelsky. "Between 1950 and 1973 unemployment averaged 2% and was always well under one million."

This was the golden age for jobs in Britain. Also the biggest period of growth for capitalism ever. The high point came in July 1955 - shortly after Anthony Eden had taken over from Winston Churchill as prime minister - when unemployment reached a post-war low of 215,800, a mere 1% unthinkable today.

So what happened to full employment? Ian Brinkley, director of think tank the Work Foundation, says the term went out of fashion in the 1970s as unemployment passed one million.
This is the period which the ruling class gave up on the idea of full employment and focused far more on growth and making profits in other ways.
In the 1980s, Margaret Thatcher pursued a different approach, which economists characterised as the prioritising of tackling inflation. The concept of full employment was dead, says Brinkley.

Unemployment climbed above the symbolically important three million figure, and stayed relatively high even still today.

So will full employment ever be achieved again ?

I dont think so under capitalism this will ever happen. As Karl Marx wonderfully explained the ruling class in their desire to divide and rule discovered the idea of keeping a army of reserve workers as Marx put it which enabled the ruling class and the boss's to hold wages down with the threat of unemployed workers coming in to do their job for the same or for less if a worker demanded more wages.

Today this is one of the capitalists most powerful weapons the threat of unemployment hangs over many of us still today as the ruling class looks to make the workers pay for the mistakes of a ecnomic system they have no say in running.

The only way i feel we will see full employment again allowing for the debate if it ever was will be a socialist ordering of society. Where the blind drive for profit will have gone and people can and will i'm sure want to work for society. Working for the needs of society and for others will bring out workers full potential. For many people this will be the first time they may enjoy work when they are not having to work for their boss's profits but for their own society, based on human needs.

prescription charges to rocket

As we hear another way of drawing more money into the governments coffers which i fully expected would happen is the raising of prescriptin charges

Patients in England will have to fork out £7.40 a time for pills and ­medicines dispensed by their doctor – an increase of almost 3%.

The increase angered campaigners who have been calling for the charges to be scrapped ­altogether, as they have been in other parts of the UK. Prices will go up on April 1, the same date Scotland joins Northern Ireland and Wales in ­abolishing charges.

The British Medical ­Association slammed the rise, calling it a “tax on the sick” and an “absurd postcode lottery”. Nanette Kerr of the National ­Pharmacy Association said: “Patients on low incomes who do not qualify for exemption will suffer the most.”

Dental charges are also rising, with a check-up increasing from £16.50 to £17. Fillings and root canal work will go up from £45.60 to £47 and more complex jobs such as dentures and bridges will increase by £6 – from £198 to £204.

This as i said was inevitable i feel as the tories who cant stand us common people getting free health care it really gets their goat always saw the raising of prescription charges as a easy target to go after.
But this doesnt make this latest decision from the tories any less painful to working class people. People who are already struggling to get by and feed themselves while loosing jobs, paying more in tax's and food and fuel prices are shooting up.


I dont see how the government can justify these rises in times of hardship for all. It is just fankly another attack on the working class as i see it.

This will affect the old and the frail the most i feel as they area lways the ones forgotton about and find it hard to get out of their houses to buy their medicines they require.
I feel they should look into providing reductions or discounts for the most in need of these prescriptions instead of a blanket rise in the prices of these .

Britain slowly slipping back towards recession

So as we hear today inflation rose from December, Retail Price Index which shows most accurately reflects cost of living, up 4.8% with public sector pay freeze and low private sector pay rises is resulting in a negative growth for the first quarter of 2011 for sure.

With the rise of VAT not being taken into account yet having only just been introduced in early January and with most of the big cuts to hit in the next few months. Things really do look bleak now. The picture is slowly starting to unflod of what a mess we are going to be left with. With hundreds of thousands of jobs set to go in the public sector which will consequently have a knock on in the private sector i can only see us heading back into recession crippling the poor even further as the government will set a bout more harsher cuts to try and pull the ship around.
But the damage is already set in i feel the ship is sinking and teh attemptst o keep it afloat are failing badly. With the tories at the helm what else should we expect really. This is worrying times indeed for the country and i cant see this working all these cuts.

With interest rates still being forced down at 0.5% to help government borrowing figures this wont change i doubt and with food and fuel prices rocketing as i have posted in previous blog posts things are looking grim.

When will the terms recession and double drip recession be rolled out as we are slowly slipping backwards i think. It is inevitable that this will happen now with all these cuts hacking apart all what is good about our welfare state. I also think the abolishment of the EMA grant to students to stay on in further education will have a bigger effect than many think. It is estimated that as much as 7 out of 10 students will be forced to leave school as they wont be able to afford to carry on. With a whole generation out of education what will they turn to ? there are very few job opputunities out there for the youth of today so that will have a big impact. Alot of kids will grow up again just like under Margret Tatcher not having any job prospects and waht affect that will have on the country will be devastating.

Fuel prices going through the roof

So i just come back from town with my mum in her car. We stopped at the petrol station on the way back. First time we have filled up post VAT rise. Now my mum doesnt have a gas guzzler by any means a 1.1 peogeot 107 very economical little car. does a lot of miles to the gallon normally. But today our fuel came in at £45. This is ridiculous coupled with the VAT rise and the price of fuel rocketing in recent weeks this is just outragous.

As i am not a driver or a motorist this doesnt affect me but i know this will affect many of you out there who do drive. For a large family with two cars possibly who are on a average to low income this fuel rise and VAT increase is going to cripple some families i feel.

What are beloved government doing about this shooting up of fuel ? nothing of course they are loving it as they can pull in more tax for themselves. Simply this is not on. With inflation going through the roof too in recent months this is just not helping people get on with their lives. I feel there is much more the government could and should be doing to put pressure on these fuel companies who are charging huge prices for fuel.

The oil companies in the world like BP and Shell are some of the worst offending capitailist companies i've ever known. The way they expolit their workers and the countries they drill in is just out of order. Cost cutting in the gulf of mexico to maintain high profit margins was found to have been the reason behind the huge oil disaster in the Gulf a year or so ago. This is just hugely irresponsible of these companies and they must be brought into line and properly regulated.

Back to my original point i feel this fuel hike and VAT will once again hit the poorest in our society the hardest. I dont buy this arguement that the rich will face more of the tax as they will be spending more. Wrong as if you are poor you have less disposable income in the first place so a rise in prices is always going to affect the people with less money the most. But once again this tory lead coalition see that attacking people on lower incomes as fair game.

Well lets see what happens in a month or so when fuel prices start reaching record highs and fuel protests start back again. Will the government then step in to help keep the country moving. Will be interesting to see how this one plays out.